A) ESG INVESTOR INFORMATION
1. Information on the management company
Smart Lenders Asset Management SAS (hereinafter “SLAM”) is an independent portfolio management company authorised by the Autorité des Marchés Financiers under the number GP-17000031. SLAM is specialised in the US and European consumer credit markets and in lending to small and medium-sized enterprises through online financing platforms (Marketplace Lending). Only professional investors are eligible. SLAM invests mainly on the following instruments : single issuer of loans/ debt obligations single issuer of bonds or similar instruments
2. Regulatory Context
Following the Decree No. 2015-1850 of 31 December 2015 on the Article 173 application of the Energy Transition Act of 17 August 2015, portfolio management companies are required to publish information on whether or not ESG criteria are taken into account in their investment policy. In accordance with the regulations, SLAM makes information available to the public concerning the terms and conditions for taking ESG criteria into account in its investment process. This information is available on its website www.smartlenders-am.com
Also, European Regulation (EU) 2019/2088 of 27 November 2019 requires portfolio management companies to disclose their approach to sustainability, since 10 March 2021, in terms of ESG criteria and sustainability risk integration and adverse sustainability impacts.
ESG criteria allow the quality of corporate social responsibility to be taken into account. Companies implement ESG-related procedures to contribute to sustainable development. These procedures can potentially improve a company’s financial performance and also improve its overall reputation.
The ESG criteria consist of three components:
- Environment: climate impact, waste management, greenhouse gas emissions management, etc.
- Social: working conditions of employees, well-being at work, gender parity, relationship with suppliers and customers, etc.
- Governance: conflict of interest management, executive compensation, board independence, anti-corruption, etc.
4. Engagement of the Company
Smart Lenders AM is seeking to act as a responsible financial player and is committed to incorporating ESG analysis into the investment process of its SICAV-SIF Moonstone Lending Fund. The company has drafted its ESG Charter and integrate ESG criteria in the selection process of online lending platforms, its primary interlocutors.
Please find our ESG Charter here
In March 2020, Smart Lenders AM has become a signatory participant of the United Nations Global Compact. By taking these first steps, we pledge our support to the UNGC’s ten principles in the four critical areas and will contribute to the achievement of the 17 Sustainable Development Goals by 2030 and raise awareness of the actions that need to be taken to sustainably finance the future
Please find our latest Communication On Progress here:
5. Investment approach and consideration of ESG criteria
As part of the company’s investment process, borrowers are selected directly or indirectly through online funding platforms supported by an algorithmic model (logistic regression). On the one hand, debt instruments do not influence the borrowers’ management, nor do they provide commitments or even information on ESG criteria. On the other hand, given the granularity of these financing operations (high number of borrowers, over 25.000 in the book) and the nature of the debtors (individuals), it is practically impossible for SLAM to take ESG criteria and sustainability risks into account in the loan selection process.
However, SLAM is sensitive to non-financial considerations, particularly in relation to social and environmental impacts. For example, SLAM finances only the best individual borrowers, who are likely to repay their loan without placing them in situations of unsustainable indebtedness (for example, borrowers qualified as prime and super-prime in the USA).
Several positive points are important to note, despite the fact that lending anonymously through online lending platforms make positive actions from our part very complicated:
- The selected borrowers are exiting the so-called “revolving” debt spiral, i.e. rolling debit balances without maturity, to enter into a loan contract redeemable at a lower rate, which allows the debt to be repaid monthly and to be extinguished at maturity (3 or 5 years).
- Borrowers are presented to us by the platforms without name nor complete zip code, so selection is guaranteed to be based solely on quantitative criteria related to their probability of repayment and not on gender, ethnic origin nor age.
- Finally, SLAM also choosed to lend through a platform specializing in financing US consumers of (legal) immigration origin who have a good financial situation but do not qualify for loans offered by traditional channels, due to their too short credit history, linked to their recent arrival in the USA.
Small Business loans
For its investments in debt financing to VSE/SMEs, SLAM has a specific ESG Policy. This Policy is based on two axes:
- Exclusion Policy
In view of its values and ambitions in terms of responsible investment, SLAM has decided not to invest in certain sectors or activities that are in contradiction with its convictions. The management company has therefore developed an ambitious exclusion policy in line with its commitments and ESG objectives.
SLAM therefore refrains from participating in the financing of projects or companies in the following areas:
- In the production and distribution of any types of weapons, if this is the main source of income for the business
- In the production and distribution of gambling, if this is the main source of income for the business
- In the production and distribution of pornography, if this is the main source of income for the business
- In the production and distribution of coal
- In the production of fossil fuels
- In tobacco production
- In the production and distribution of fur products
- In the production and distribution of breast-milk substitutes
- In the manipulation of embryonic stem cells and foetal tissue
In addition, Smart Lenders AM refuses to invest in projects carried out by companies that contravene the principles of the UN Global Compact – to which SLAM is a signatory – or companies that specifically contravene the United Nations Business and Human Rights Guidelines and the conventions of the International Labour Organization.
Finally, SLAM’s investment policy by nature excludes all projects presenting a risk associated with climate change or a risk related to biodiversity.
- Integration of ESG criteria
For its investments in debt financing to VSE/SMEs, SLAM is committed to integrating the analysis of ESG criteria in the monitoring of its portfolio and in the establishment of privileged partnerships with online financing platforms.
SLAM is now developing a real influence approach pushing the platforms, its direct counterparts, to integrate of ESG criteria in their selection process.
- Statement on principal adverse impacts of investment decisions on sustainability factors as off 31/12/2022
In the context of Article 4, the European Regulation 2019/2088 of 27 November 2019 provides for a transparency obligation regarding the consideration of principal adverse impacts in investment decisions on sustainability factors at entity level for all financial actors that exceed the average number of five hundred (500) employees over the financial year. Smart Lenders is thus not subject to this transparency obligation, and is not able to include all of them in the ESG integration process. Indeed, the indicators that make up the ESG questionnaire drawn up by Smart Lenders have been selected on the basis of the material issues identified by the management company and specific to the platforms and VSBs financed.
B) ESG INVESTMENT INFORMATION
SLAM only manages foreign investment vehicles whose net assets are below the €500 million threshold. Therefore, the management company only makes a declaration “ESG Investor Information”. The elements of this declaration are presented in the ESG Policy.
With respect to Article 29 of the French energy-climate law, SLAM currently manages less than 500 million euros and is therefore not subject to all extra-financial reporting obligations.
However, SLAM has taken into account in its investment strategy ESG criterias, has implemented an ESG charter and a Sustainability Risk Management Policy.
C) SUSTAINABILITY INFORMATION
European Regulation (EU) 2019/2088 of 27 November 2019 requires portfolio management companies to disclose their approach to sustainability, since 10 March 2021, in terms of ESG criteria and sustainability risk integration and adverse sustainability impacts.
In accordance with the SFDR regulation, Smart Lenders AM (“SLAM”) integrates sustainability risks into its investment process through online lending platforms.
Please find our Sustainability Risk Management Policy here